Gambling on casinos for regeneration: Why Atlantic City is out of luck

The story is a familiar one. A seaside hamlet begins to grow in the late 19th century once workers in a nearby conurbation get an annual week’s holiday. They come for the sea air at first but soon other, more contrived attractions are added. In the case of Atlantic City these included a woman astride a horse diving on the animal into a pool of water 40 feet below, then famous entertainers, the venue for the Miss America competition etc. The visitors create a demand for guest houses, and for a few months each year the place is a crowded, almost surreal swirl of bathers, neon lights, food stalls, amusements, rides and much more.

Then it all goes downhill as fast as a ride on a roller coaster, once people start to get cheap flights to warmer places, where the weather is more reliable and the food and drink is just as plentiful but cheaper. By the mid-1970s Atlantic City was on the skids.

A lucky break?As we tell in our book, the city sought salvation in casinos. At that time casinos were strictly regulated in the USA, and the only real competition for legal gambling was in Las Vegas, 2500 miles west. Legislation passed by the state of New Jersey in 1977 made gambling legal in Atlantic City, a proposition approved in part because the State itself would get a cut of the tax raised from the casinos.

The first casino opened in 1978, and eight others followed in the next 3 years. With a huge potential market nearby on the eastern seaboard (New York is 125 miles away), it was a licence to print money. The casinos were 100 times more profitable per square foot than a shopping centre.

The “one armed bandits”, poker games and roulette wheels also helped fund other facilities through the tax arrangements – a health centre, youth clubs, an aquarium, a baseball stadium, facilities for the elderly. AC and the state of New Jersey were on a roll. Imitation is the sincerest form of flattery and the Blair government enthused about the potential transfer of the model to regenerate towns like Blackpool.

The crash and afterAll that is in the past. Four of the twelve casinos have closed, and another is expected to close soon. The Trump Plaza stands empty. The Revel, built at a cost of $2.3 billion, is empty and has been sold for a mere $110 million. The financial crash started it. The special train bringing bankers from Manhattan no longer operates.There has also been a crisis of over-supply. There are now many more “convenience casinos” in the hinterland across New Jersey and Maryland, which compete with the more luxurious and hotel-based “destination casinos” that Atlantic City offers. The “day trippers” now play nearer to home. So even though the regional gaming market has grown during the long economic downturn, it cannot sustain the current number of outlets. The Revel made the mistake of pitching its offer to the top end of the market only, believing like so many others a decade ago that the good days would never end.

A city of the poorThe nature of the gaming and hospitality industries means that Atlantic City is a city of the poor. Most of the jobs are poorly paid, and require little skill; for example, housekeepers in a hotel or even those operating a poker table require little command of English. Seventy per cent of Atlantic City households rent, whereas for New Jersey as a whole the figure is 30%. Those who prosper are likely to move out, and be replaced by incomers attracted by the cheap housing and chance of casual jobs in the tourism and casino industries. Crime rates are high, and fear of crime deters potential middle income residents.While the Boardwalk and the casinos weathered Hurricane Sandy, poor households living in low-lying accommodation adjacent to the creek behind the beachfront were not so fortunate.

Tax and budgetsProperty taxes are higher in Atlantic City than in most of the rest of the USA. This prompted the casino owners to come together and take legal action to seek a reduction; one casino operator told me they had been paying $58 million a year. The appeal was successful and the city council has been ordered to repay $75 million. They can only do this by raising a bond, as the money has been spent. What’s more, the largesse of the boom years saw the council hiring extra staff, so the budgets cannot be turned around quickly or painlessly.

What to do?The strategies being favoured by the planners and casino interests are for a tourism and leisure future, but one more balanced than the recent emphasis on gambling. There ideas to open up the waterfront again and connect it to the town – currently the casinos and the boardwalk block it off. There are aspirations to build second homes that would help attract families, just as the casinos are also trying to broaden their appeal. Tax abatements might be offered to make the proposition more viable. Any such development would need to be flood-proofed given the hurricane risk and climate change.

Economically there are hopes for call centres or similar users that might be drawn by the pool of surplus, cheap labour and available land. There are even dreams for a technology park on, though the skills profile of the population, the lack of a research base and the competition from other sites elsewhere would seem to make this, at best, a long term prospect. Meanwhile land remains zoned for casinos that will never be built.It is a sobering story, a relic from a past era when markets were bullish , investors would take risks and gambling was still restricted in the USA and so a local monopoly was possible.

The financially strapped council faces some tough challenges. Instead of the quick fix and ready cash from the casinos it needs to work with the poor and unemployed to help them make their neighbourhoods more resilient in the face of the economic and environmental threats that they face. There should be a role for community business start-ups, and for a more socially useful approach to urban design that replaces the blank walls of the megalithic parking garages with a more interesting streetscape. The joy of being beside the sea needs to be recaptured: it’s better than facing a row of “one-armed bandits”.